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It’s the Spending, Stupid

A column by Nicole Gelinas this week in Forbes.com compares traditional high-tax “old” states such as California and New York to what has been traditionally low-tax “new” states such as Arizona, Florida and Nevada which are now facing budget problems.

The problem, Gelinas notes, is that “during the boom times,” the low-tax states “took a page out of the old state’s playbook, driving up spending at an unsustainable pace.” She notes that spending in the new states “is way, way higher than it was before the boom started.” Indeed, between 2000 and 2008, spending in Nevada “grew by 70 percent, out-pacing population growth by 40 unbelievable percentage points.”

Because of the spending explosion, the new states now face a “tough choice” – “raise taxes to fund permanently higher costs or they can aggressively cut spending.”

Gelinas calls it surprising, but we think it’s sad, that these states are taking the “easy” way out and “are raising taxes with zeal,” thus “taking a small step toward transforming themselves into the high-tax states that so many of their residents have fled.”

And why haven’t states such as Nevada “reduced spending when faced with the downturn, instead of turning to new taxes?” Gelinas asks rhetorically. “A big reason is the growing power of special interests that depend on taxpayer dollars, making these once frugal states look a bit more like California and New York.”

“Special interests” such as the teachers union in Nevada, which spearheaded the $232 million tax hike already approved by the Legislature this year. And these special interests “have become adept at weaving lavish spending into state budgets in good times” – (hello, full-day kindergarten!) – that “it’s hard to cut when times get tight.”

So, yes….Nevada has a spending problem, not a revenue problem.

If the Legislature hadn’t pumped up Nevada’s government with steroids during the boom years we wouldn’t be in the position we’re in today. The recession is presenting legislators with an opportunity to return Nevada’s budget to a normal and sustainable level, funding only truly essential and legitimate government services. We already know that not a single Democrat will vote to do that. The only question remaining are which “bad” Republicans will sadly join them at this year’s Taxapalooza.